'Panic buying' may drag luxury brands under IT scanner

Taxmen are likely to seek details of buyers from sellers of such items in the few days since high-denomination notes were demonetisedDeepshikha Sikarwar | ET Bureau | Updated: November 11, 2016, 10:49 IST

That midnight shopping spree for gold on Tuesday night and the hurried purchases of luxury goods such as Louis Vuitton bags and watches may not go past the tax radar undetected.

Taxmen are likely to seek details of buyers from sellers of such items in the few days since high-denomination notes were demonetised. “We would be keeping a close watch for any sudden surge in purchase payments,” a senior Central Board of Direct Taxes official said

The government demonetised Rs 500 and Rs 1,000 notes on Tuesday night, triggering a rush to spend money held in such currency that would be difficult to account for when exchanging them for new notes or depositing them in bank accounts.

The official said shopkeepers will also have to deposit the money in banks and they would then be asked to explain and provide details of their sales.

Moreover, the official said, high-value purchases require mandatory quoting of the permanent account number, which will enable tax authorities to keep track of such spending. Any transaction exceeding Rs 2 lakh, regardless of mode of payment, requires the PAN to be quoted.

There have been reports of high-end luxury outfits that stayed open well through midnight to enable purchases. Gold rates shot up to Rs 50,000 per 10 grams on Tuesday night. Some high-end shops are said to have even sent out messages to registered clients, promising to facilitate transactions in the demonetised currency.

Prime Minister Narendra Modi had in a nationwide address announced a crackdown against black money and counterfeit currency by demonetisation of Rs 500 and Rs 1,000 notes. The government has allowed citizens to deposit the scrapped currency in banks from November 10 to December 30.

Revenue secretary Hasmukh Adhia said on Wednesday that only cash deposits exceeding Rs 2.5 lakh in bank accounts will be scrutinised by the tax department and if there is a mismatch with income-tax returns, tax and a 200% penalty would be levied. He said while farm income is tax-exempt, disproportionate deposits in accounts of farmers not commensurate with land holdings and earnings would also be monitored.

However, for temples there is an exemption for money from donation boxes, although trusts will have to keep records of donations.